Reelz Goes for Broke

In many ways, Stan Hubbard would be a lot better off if it were 1985. Life was easier then for independent cable networks to get distribution, advertising and viewers.

In that era, Americans still watched just a few channels, and were far more inclined to drop everything for a week to watch a soapy historical miniseries like North and South.

But in 2011, the fledgling ReelzChannel is in just 60 million homes, stuck on upper-tier channels and receives no carriage fees from cable companies, missing out on that platform’s powerful dual-revenue model. Plus, Hubbard is making a huge bet that millions of DVR-addicted Americans will commit eight days to a sweepingly retro miniseries, The Kennedys (which premiered on April 3).

That doing business as a fledgling cable network is tough sledding is not lost on Hubbard. “We are 100 percent advertiser supported. So we are somewhat limited,” he said.

Launched in 2006, ReelzChannel tallied about $15 million in ad revenue last year. Consider that Viacom-backed Logo, launched around the same time, pulled in about $24 million just in carriage revenue in 2010.

Hubbard, who owns TV and radio stations in Minnesota and New Mexico, would like Reelz to be in 100 million homes in five years in order to increase ratings and ad dollars. But that won’t be easy in an increasingly crowded cable landscape still expanding its digital spectrum.

Thus The Kennedys Hail Mary.

The network’s independence proved to be an asset in one regard; it was able to nab the series nine days after it became available. “In a big conglomerate, there are so many crosscurrents you are bound to bump into yourself,” said former Lifetime CEO and Reelz board member Doug McCormick.

Hubbard is unabashedly bullish. “I don’t think there has been a TV series this interesting in decades or ever,” he said. The Kennedys is intriguing—and tainted. The History Channel dumped the controversial project after dropping $25 million into it. “We are looking to catch lightning in a bottle,” admitted Hubbard. “That said, if it weren’t great television, or if it were an abomination of history, we wouldn’t do it. Controversy is what brought it to us and we’ve been trying to put [the controversy] out.”

That’s because some advertisers don’t neccessarily crave that sort of buzz. As of late last week, The Kennedys was 70 percent sold out with 17 brands on board. Given that Reelz spent an estimated $7 million to obtain the show and another $10 million on marketing, many doubt it will be profitable.

The net “has been losing money since they launched,” said Kagan analyst Derek Baine. “But the company is well backed.”

Indeed, Hubbard sold his shares in DirecTV predecessor United States Satellite Broadcasting in the late 1990s for $1.8 billion. “There’s a pattern of Stan going against the grain and coming out a winner,” said McCormick. “He was way ahead of the curve on satellite.”

Hubbard expects more brands to jump in if ratings pop. And clearly, The Kennedys is as much about putting Reelz on the map as it is about revenue. The press alone generated over the series should open the eyes of Hollywood executives looking for homes for original projects, argued McCormick—while alerting viewers that the channel exists. “I wouldn’t want to be a cable operator this week and not be carrying ReelzChannel,” he said.

One show has turned around the perception of a network before. Think AMC and Mad Men, said Baine. “Reelz is going in a good direction. This will expose the brand to more people. But they’ve got to build a full schedule. This won’t solve all their problems.”

So why not extend The Kennedys over eight weeks rather than eight nights? Hubbard thinks that Reelz is better off contained in a tight time period. “We’re treating it like an old-school miniseries,” he said. “And we’ll see what else we can pick up if it’s available.” The Nixons, perhaps. —with Anthony Crupi